Mall landlord seeks credit rating

Charter Hall Retail REIT
plans to put its portfolio of Australian shopping centres up for a credit rating, which would allow it to raise capital in the bond market.

The mall landlord is also focused on refinancing its debt in the lower interest rate environment and is working on the sale of its US, Polish and German properties, while assessing four mid-sized shopping centres on Australia’s east coast to buy once its US assets have been sold.

“We have been very successful in the past few years at selling offshore assets and lining up the repatriation of that equity with an acquisition in this country so we’re reinvesting in one action and not having the money sitting around earning very low rates of interest," trust fund manager Scott Dundas said.

Seven of the nine shopping centres that the trust owns in the US are under contract. One of the sales will settle this month, with three others to follow within 60 days.

The trust extended an €81 million ($100.8 million) debt facility on its German assets out to 2014. General manager of finance Philip Schretzmeyer expects the cost to fall substantially, by as much as 1 percentage point, although the exact rate is yet to be locked in.

It aims to sell the European properties within the next 2½ years and is already preparing them for market.

Mr Dundas said the trust would initiate the process of having a credit rating assigned to its portfolio of subregional and neighbourhood shopping malls after the funds from all sales had been repatriated. “That type of strategy will be wrapped up with the strategy to bring money back to Australia," he said.

It would be a lengthy process, but Mr Dundas was confident that the portfolio’s low occupancy costs of about 8.4 per cent for specialty tenants and income streams supported by supermarket tenants with long leases would put it in a good position for a strong rating.

Related Quotes

Company Profile

The trust has started a share buyback but Mr Dundas said it now had better uses for its funds, in centre redevelopments and acquisitions.

It has earmarked about $76 million for centre redevelopments, including $55 million allocated to redevelop its Gowrie Street Mall at Singleton in NSW.

The trust invests in centres worth between $20 million to $80 million. In the current market, there’s little competition from other buyers as ­private investors and private syndicates tend to look for lower cost properties, while the bigger groups look for larger centres.

“It’s part of our investment rationale to buy the No. 1 supermarket asset in a catchment," Mr Dundas said.